Integral Ad Science (IAS) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a strong revenue growth of 34% to $100.3 million, exceeding prior guidance of $97 million to $99 million [31][28] - Adjusted EBITDA for the second quarter increased 23% year-over-year to $31.6 million, maintaining a margin of 31% [39][28] - Net income for the quarter was $2 million, marking the second consecutive quarter of profitability [39][28] Business Line Data and Key Metrics Changes - Programmatic revenue grew 51% year-over-year, representing 57% of total revenue from advertisers [32][31] - Context Control, a contextual avoidance solution, accounted for 45% of total programmatic revenue, up from 41% in the previous quarter [32][10] - Advertiser Direct revenue increased by 4% year-over-year, with video accounting for 48% of total Advertiser Direct revenue, up from 45% [33][34] Market Data and Key Metrics Changes - International revenue represented 31% of total revenue for the second quarter, with a 7% increase in international revenue [19][35] - Revenue from the Americas was $68.7 million, up 51%, while EMEA and APAC revenues were $23.6 million and $8 million, respectively [36] Company Strategy and Development Direction - The company is focusing on expanding its product offerings, including new solutions for social media and CTV, and has launched partnerships with platforms like TikTok and Spotify [17][15] - IAS is investing in emerging markets, including LatAm and Southeast Asia, to enhance its global reach [19][20] - The company is revising its full-year outlook to reflect macroeconomic headwinds but remains optimistic about long-term growth [28][27] Management's Comments on Operating Environment and Future Outlook - Management noted softness in some verticals and longer sales cycles due to macroeconomic conditions, expecting these trends to continue into Q4 [27][28] - The company anticipates achieving full-year revenue growth of approximately 24% and maintaining adjusted EBITDA margins at around 31% [28][42] Other Important Information - IAS has appointed Thomas Joseph as the new Chief Technology Officer to lead tech innovation [49][48] - The company is experiencing a significant uptick in the adoption of its Context Control solution, with a 25% increase in targeting customers quarter-over-quarter [58][57] Q&A Session Summary Question: Reason for guidance down - Management indicated that the guidance down is due to observed softness in the market, including lower marketer spend and longer sales cycles [52][51] Question: Strength in the Americas - The growth in the U.S. is attributed to the strong adoption of Context Control, which has accelerated programmatic business [53][52] Question: Update on targeting adoption for Context Control - There has been a 25% increase in targeting customers quarter-over-quarter, with 86 of the top 100 accounts using Context Control for avoidance [58][57] Question: Decline in large customers - The decline was due to a few large advertisers dipping below the $200,000 threshold, not significant losses [61][60] Question: Digital advertising and recession - Management noted that marketers focus more on ROI and media quality during soft economies, which could impact certain verticals more than others [67][66] Question: Social media share from open web - Social media is gaining share, with 43% of Advertiser Direct revenue coming from social platforms, up from 40% [78][77] Question: Competitive environment - The company is seeing an uptick in win rates, now slightly above 80%, with strong performance in both U.S. and international markets [80][79] Question: Macroeconomic weakness - The weakness is attributed to lower marketer spend and delayed activations, with expectations for continued impact into Q4 [88][87] Question: Impact of Google's cookie deprecation delay - The delay raises awareness of the shift to contextual targeting, providing marketers more time to plan [90][89] Question: Client renewals and negotiations - Over 90% of renewals are evergreen, and pricing is expected to hold steady [96][95] Question: Areas for growth - The company is focused on expanding into new total addressable markets (TAMs) such as audio and gaming [99][98]